Entrepreneurship in Technological Systems - The Development of Mobile Telephony in Sweden. Bengt G Molleryd

Entrepreneurship in Technological Systems - The Development of Mobile Telephony in Sweden Bengt G Molleryd Akademisk Avhandling Som for avlaggande av filosofie doktorsexamen vid Handelshogskolan i Stockholm framlagges for offentlig granskning Tisdagen den 19 oktober 1999 kl.10.15 i sal Ragnar Handelshogskolan, Sveavagen 65.

Entrepreneurship in Technological Systems - The Development of Mobile Telephony in Sweden

~ STOCKHOLM SCHOOL OF ECONOMICS "':,;, EFI, THE ECONOMIC RESEARCH INSTITUTE EPI Mission EFI, the Economic Research Institute at the Stockholm School of Economics, is a scientific institution which works independently ofeconomic, political and sectional interests. It conducts theoretical and empirical research in management and economic sciences, including selected related disciplines. The Institute encourages and assists in the publication and distribution ofits research findings and is also involved in the doctoral education at the Stockholm School of Economics. EFI selects its projects based on the need for theoretical or practical development ofa research domain, on methodological interests, and on the generality ofa problem. Research Organization The research activities are organized in nineteen Research Centers within eight Research Areas. Center Directors are professors at the Stockholm School of Economics. ORGANIZATION AND MANAGEMENT Management and Organisation; (A) Center for Ethics and Economics; (CEE) Public Management; (F) Information Management; (I) Man and Organisation; (PMO) Industrial Production; (T) MARKETING Center for Information and Communication Research; (CIC) Center for Consumer Marketing; (CCM) Marketing, Distribution and Industrial Dynamics; (D) ECONOMIC PSYCHOLOGY Center for Risk Research; (CFR) Economic Psychology; (P) Prof Sven-Erik Sjostrand Adj Prof Hans de Geer Prof Nils Brunsson Prof Mats Lundeberg Acting Prof Jan Lowstedt Prof Christer Karlsson Adj Prof Bertil Thorngren Associate Prof Magnus Soderlund Prof Lars-Gun nar Mattsson Prof Lennart Sjoberg Prof Lennart Sjoberg ACCOUNTING, CONTROL AND CORPORATE FINANCE Accounting and Managerial Finance; (B) Prof Lars Ostman Managerial Economics; (C) Prof Peter Jennergren FINANCE Finance; (FI) ECONOMICS Center for Health Economics; (CHE) International Economics and Geography; (I EG) Economics; (S) ECONOMICS STATISTICS Economic Statistics; (ES) Prof Clas Bergstrom Prof Bengt Jonsson Prof Mats Lundahl Prof Lars Bergman Prof Anders Westlund LAW Law; (RV) Prof Erik Nerep Chairman ofthe Board: ProfSven-Erik Sjostrand. Director: Associate ProfBo Sellstedt, ADRESS EFI, Box 6501, S-II3 83 Stockholm, Sweden. Internet: www.hhs.sejefij Telephone: +46(0)8-736 90 00 Fax: +46(0)8-31 6270 E-mail efi@hhs.se

Entrepreneurship in Technological Systems - The Development of Mobile Telephony in Sweden Bengt G Molleryd STOCKHOLM SCHOOL OF ECONOMICS \:f;; EFI, THE ECONOMIC RESEARCH INSTITUTE

Dissertation for the degree of Doctor of Philosophy (PhD) in Business Administration (filosofie doktor) Stockholm School of Economics 1999 EFI and the author ISBN 91-7258-523-4 Keywords: Entrepreneurship Innovation Mobile telephony Mobility Technological system Users English styling: George Cook Graphic design: Graffoto AB Cover: Graffoto AB Distributed by: EFI, Ekonomiska Forskningsinstitutet Stockholm School of Economics Box 6501, 113 83 Stockholm Tel +46 (0)8 736 90 00 www.hhs.se Elanders, Gotab, Stockholm 1999

Ackn Qwledgement This book is the outcome ofa process that started back in 1990 when I began working at the Center for Marketing, Distribution and Industry Dynamics, at the Economic Research Institute (EFI), at the Stockholm School of Economics. It was Associate Professor Staffan Hulten who made it possible for me to join the department and who guided me into the world of research. We collaborated extensively in laying the foundation for this study and Staffan has maintained an active interest throughout in my research for which I am deeply appreciative. Professor Lars-Gunnar Mattsson has consistently supported me in my research endeav01.lr in the area of mobile telephony and entrepreneurship. I would thank him for his invaluable help to me in finalisii1g this study. Lars Gunnar Mattsson and Staffan Hulten were joined on my supervisory committee by Professor Bengt Stymne to whom I am grateful for his valuable suggestions for the completion ofthis book. Anders Lundgren has been instrumental in providing resources for my research in his role as project leader for the group pursuing telecom-related research at the department, which later became the Center for Information and Communication Research (CIC). I would like to thank him for that and for so closely involving me in the International Telecommunication Society's Conference in Stockholm in 1998. Professor BertH Thorngren laid the foundation for the telecommunication project in his management role at Swedish Telecom/Telia and consistently promoted our research group, and has over the years been an important inspiration to my research. The financial support for this study, which is gratefully appreciated, has been kindly provided by KFB, Kommunikationsforskningsberedningen, (Swedish Transport and Communications Research Board), Swedish Telecom/Telia and Ruben Rausings Fond During my tin1e at the department I have had the pleasure ofsharing an office with Dimitrios Ioannidis, facilitating lively discussion with an international flavour and an interchange ofideas stemmii1g, in part, from our readings ofthe FT. My interest in issues on distribution is the result ofa fruitful collaboration with Per Andersson. This study has benefited immensely from numerous seminars and discussions and I would like to express my appreciation to my research colleagues: Gunnar Alexandersson, Monica Alfredsson, Karolina Brodin, Ann-Charlotte Edgren, Vlf Essler, Magnus Hagberg, Karl-Olof Hammarkvist, P-G Holmlov, C-F Helgesson, Susanne Hertz, Michael Acknowledgement I 5

Kaplan, Stewart Kowalski, Karl Oskar Kallsner, Hans Kjellberg, Anders Liljenberg, Mia Liss, Lena Nordenlow, Anna Nyberg, Jaana Simila, Ivan Snehota, Kristoffer Strandqvist, Susanne Sweet, Magnus Soderlund, and Mats Vilgon. A special thought goes to our late colleague Torbjorn Flink. Colleagues abroad have also contributed to the thesis. I am happy to count Professor Jurgen Muller as my friend and he opened possibilities to collaborate with fellow researchers in Central and Eastern Europe. Professor Karl-Ernst Schenk arranged a stay at the University of Hamburg in 1996 that were conducive in my explorations into standardisation problems. This study would not have been possible to accomplish ifthe many persons contacted in the mobile telephone industry had not given so generously oftheir time to talk to me and support my research. It has been a privilege to meet with the "founding fathers" of Swedish mobile telephony - Ake Lundqvist, Torbjorn Johnson, Carl-Gosta Asdal, Osten Makitalo, only to mention a few. A Telia financed research project on the role ofthe users provided unique opportunities to look into the role ofusers in shaping mobile telephone technology - a thanks to Jonas Storakers. Telefonaktiebolaget LM Ericsson and Telia Mobile kindly sponsored the printing and graphic design of this book. Assistant Professor Ivo Zander acted as opponent in an internal seminar and I am grateful to him for contributing constructive suggestions enabling me to improve the final text. I would like to express my gratitude to George Cook who transformed my text into readable El1glish, and to Graffoto for the graphic design. My thoughts go to my parents who unfortunately are not able to read these lines which they would have done with happiness. I would like to thank my sisters Gerd, Britt and Gun and my brother Alffor being so encouraging. My two daughters Astrid and Majken have seen this book emerge but it would never have been completed without the constant support from my Lotte. Stockholm September 1999 Bengt G Molleryd 6 I Acknowledgement

CONTENTS 1. Introduction 12 1.1 Sweden in the forefront 12 1.2 Forces behind the development 14 1.3 The impact of entrepreneurship 15 1.4 Network technology - technological system 16 1.5 Course of events divided into three phases 16 1.6 Research question 17 1.7 Positioning and contribution 19 1.8 Research within entrepreneurship 20 1.9 The scope of the study 20 1.10 Disposition 21 2. About mobile communications 22 2.1 Terms used 22 2.2 Several systems 22 1.3 The significance of mobile telephony 24 1.4 Projections 25 1.5 Standards 25 1.6 The basis of mobile telecommunication 26 1.7 Legal requirements 26 3. Methodological framework 28 3.1 The case study methodology 28 3.2 Outcome of case studies 30 3.3 The rationale for using case studies 31 3.4 Sources and interviews 32 3.5 The research process -34 4. Theoretical framework 36 4.1 Introduction -36 4. 2 Technological system 37 The system concept 38 Development block 38 Two notions of technological system -39 Interaction and network approaches -41 The significance of users -42 User-producer approach -43 To sum up on systems -44 4 3 Innovations...... -44 What is innovation -44 Four categories of innovations.. -45 Science and innovations -48 4.4 National System of Innovation.. -48 National differences 51 Effect of localisation 51 Co-evolution 53 Summing up on innovations 54 4.5 Entrepreneurship theory and research 55 Different approaches to entrepreneurship 56 Schumpeter's theory of entrepreneurship 57 Austrian theory of entrepreneurship 59 The distinction between entrepreneurship and entrepreneurs 60 Individual entrepreneur 62 Entrepreneurial teams - collective entrepreneurship...62 4.6 Th ree sources of entrepreneurship 63 The individual as entrepreneur 64 The company as entrepreneur 64 The network as entrepreneur 65 To sum up on entrepreneurship..67 Formulation of an analytical tool 67 A definition of entrepreneurship..69 4.7 Th ree so urces of entrepreneurship identified.]1 Theoretical constructs.]1 Contents 17

Entrepreneurial spiral -72 Next step -72 5. The local phase 1950-70 73 5.1 The introduction of the first car phone system -73 5. 2 Network operator -73 Modest investment -74 Development of a second system -75 Private operators -77 5.3 System suppliers 78 Technique of the different systems " -78 5.4 Mobile telephone suppliers.. -79 5 5 Distributors -79 5.6 End-users 80 5.7 Entrepreneurship in the local phase.82 The individual as entrepreneur 82 The company as entrepreneur 83 The network as entrepreneur 83 5.8 Summarising entrepreneurship in the local phase 83 In relation to the technological system 83 6. The National/Nordic phase 1967-95 85 6.1 General overview 85 6.2 Network operator 85 The Land Mobile Radio Survey 1967 85 Development of a Nordic system 87 Development of a manual system...88 The opening of a man ual system - MTD......88 NMT development from 1972 89 Doubtful suppliers 91 Makitalo involved...............91 NMT - 10-15 people working in Stockholm.. 92 End-users own the equipment '".93 Difference US - Sweden cellular...93 Nordic Mobile Telephone - NMT 94 Effects of underestimation 95 Expansion of NMT internationally 96 Competitors in the network operators' market 97 Kinnevik becomes a mobile telephone network operator 100 Comvik launches its network 102 Gradual expansion 104 6.3 System suppliers 106 Co-operation between the industry and the NMT-Group 106 Ericsson adopts mobile telephony 107 Ericsson's long history in radio communication 108 Expansion through acquisitions AGA - Sonab 108 System supplier 109 The sale of systems 110 Magnetic - manufacturers of MTD transmitters 111 Radiosystem increased its value by SKr 465 million in ten years...112 Allgon - from car aerials to mobile telephony 114 6.4 Mobile telephones 116 A historic settlement - the opening of a mobile telephone market 116 Technophone 118 AGA and Sonab 118 Spectronic - sub-contractor at first 118 The market for mobile telephones.120 6.5 Distribution.. 121 1971-81 specialist retailers 122 1980s - automotive dealers, office shops. 122 Geab - from car showroom to retail chain 123 6.6 End-users 124 6.7 Entrepreneurship in the national/nordic phase.. 125 The individual as entrepreneur..125 The company as entrepreneur 126 The network as entrepreneur 126 8 I Contents

The three sources of entrepreneurship 127 Entrepreneurship placed in the technological system 127 7. International phase 1992-98 129 7.1 Regulators/politicians /standardiser 129 GSM development 129 First step 129 7.2 Network operators 133 Tel.ia - mobile telephony a growing activity 134 Comviq - confident of victory 136 NordicTel - less and less Swedish 140 NordicTel's operating licence 140 Ownership changes 142 Vodafone application 143 Air Touch becomes a majority owner 143 Opening of Europolitan network 144 7.3 System supplier 146 Ericsson - mobile telephony more and more important 146 New suppliers 148 Sendit 148 Radio Design 149 Noalto 150 Time Space Radio 150 Cetronic - InfoCast AS 151 Moteco AS 151 Carant AS 151 7.4 Mobile telephone suppliers 15 2 Ericsson 152 Possio System Innovation 153 7.5 Distribution 153 1990S 153 Geab is expanding 156 Unisource purchase Geab and then sell it 156 Talkline - aiming for business customers 157 APE Telecom 158 7.6 End-users 158 Mobility 160 Purchasing 162 7.7 Entrepreneurship in the international phase 162 The individual as entrepreneur..163 The company as entrepreneur 163 The network as entrepreneur 164 Entrepreneurship placed in the technological system 164 8. Conclusions and an entrepreneurial spiral 166 8.1 Concluding 166 8.2 Interpretation of three sources of entrepreneurship 166 The characteristics of entrepreneurship in the three phases 168 Comparison of the entrepreneurship in the three phases 169 The innovation types 170 Taken together 170 8.3 How end-users changed the perception of mobile telephones 171 The entrepreneurship in relation to the technological system 172 8.4 The co-evolution of the development 173 8.5 Mobile telephony as National System of Innovation...174 8.6 The cumulative character and the connection of entrepreneurship - the entrepreneurial spiral 175 8.7 Future research 179 Appendix 181 Personal Interviews 181 Bibliography 183 Official documents 183 Communications to the Government, Correspondence...183 Internal material Swedish Telecom 186 Abbreviations 187 References 187 EFI - The Economic Research Institute Reports since 1995 194 Contents 19

TABLES Table 1 The annual growth of the installed base of mobile telephone subscribers 1969-98 in Sweden............................................................................ 13 Table 2 Different systems introduced during the development of mobile telephony... 23 Table 3 The diffusion of mobile telephony in Sweden 1956-98 indicated by the number of mobile telephone subscribers per 100 inhabitants 23 Table 4 Annual turnover for the network and mobile telephone market, and system suppliers in Sweden 1981-98 in million SKr..... 24 Table 5 Entrepreneurial matrix................................................................ 70 Table 6 Investment in MTA in SKr at 1998 year's prices (137 mobile telephones) 75 Table 7 Swedish Telecom's annual turnover for the mobile telephone service, and revenue per subscriber 1956-71 in SKr at 1998 year's prices........................... 77 Table 8 Connection and annual charge 1956 and 1967 in SKr at 1998 year's prices 80 Table 9 Details about MTA and MTS 82 Table 10 Entrepreneurship in the local phase 83 Table 11 Swedish Telecom's share of the network market 1979-83 103 Table 12 Magnetic AS economic development 1974-83 112 Table 13 Radiosystem's economic development 1978-88 113 Table 14 Allgon's economic development 1984-98 115 Table 15 Spectronic's economic development 1985-98...................................... 119 Table 16 Mobile telephone suppliers.................. 120 Table 17 Mobile telephone retailers 121 Table 18 Mobile subscribers: Lines of business............................................. 124 Table 19 Entrepreneurship in the national/nordic phase 127 Table 20 Swedish Telecom Radio/Telia Mobile annual growth in number of mobile telephone subscribers 1978-98 134 Table 21 Swedish Telecom Radio/Telia Mobile economic development 1977-98........... 134 Table 22 Comviq's total number of subscribers and annual growth in per cent 1982-98.......................................................................... 137 Table 23 The number of pre paid card for mobile telephony sold 1997-98 138 Table 24 Comviq's financial development 1982-98 in million SKr 139 Table 25 Europolitan's number of subscribers and annual growth 1993-98 145 Table 26 Europolitan economical performance 1992-98 146 Table 27 Proportion in per cent of public telecommunication and radio communication in Ericsson's annual turnover 1969-98 147 Table 28 Weight and speech time for hand portable mobile telephones 1987-98 152 Table 29 Number of mobile telephones sold in Sweden 1981-98 154 Table 30 Price development in SKr for mobile telephones 1957-98 at 1998 year's prices... 159 10 I Contents

Table 31 The cost for connection fee, annual fee, call charges for one year and the cost for a mobile telephone 1956-98 at 1998 year's prices................ 162 Table 32 Entrepreneurship in the international phase 164 FIGURES Figure 1 Participants in the technological system 68 Figure 2 The technological system in the local phase 84 Figure 3 Private operators from Wikander to Comvik...................................... 100 Figure 4 The technological system in the national/nordic phase 128 Figure 5 The technological system in the international phase 165 Figure 6 Entrepreneurial spiral., " 178 Contents 111

1. Introduction 1.1 Sweden in the forefront Ifone were asked to pick out one ofthe more significant innovations ofthe last decade, Internet and mobile telephony would certainly be among the main candidates. They are both pervasive technologies with wide social and economic implicatiol1s. This study focuses on the latter, mobile telephony with all its sub-systems, which is regarded as a technological system. This choice presents an opportunity for addressing central issues concerning economic and industrial development and for exploring the forces behind the development oftechnological systems. When examinh1g economic developn1ent, it is relevant to introduce the concept ofentrepreneurship. Entrepreneurship has positive connotations. The actions performed by entrepreneurs contribute towards the spawning of new firms and the prosperity ofexisting organisations. One way to apprehend the dynamic effect ofentrepreneurship is to capture its presence in growth industries, for example information technology or telecommunications. Europe definitely lags behind the US in information technology. The picture is quite different, however, when it comes to telecommunications, both as regards the industry as a whole and mobile telecommunications in particular, largely due to the leading position held by tl1e Nordic countries. Mobile communications constitutes a truly dynamic market, as it is currently in a state ofperpetual growth. The annual growth in mobile telephone subscribers has been impressive as table I exhibits. Industry experts anticipate that the total number of mobile subscribers will surpass the installed base offixed telephol1es in the world, currently about 700 million, within in a year or two and that a figure ofone billion mobile users will be reached by the year 2004. 12 I Introduction

Year Annual growth in percent Table 1 / The annual growth of the installed base of mobile telephone subscribers 1969-98 in Sweden Source: Swedish Telecom, /ndustriforvaltnings AB Kinnevik, EuropoJitan 1970 59 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 123 59 32 20 16 23 45 39 41 37 15 66 22 30 These projections make compelling reading. Prior to the mid to late I980s, there were few, ifany, who thought that mobile telephony would become a universal phenomenon. The telecommunication industry itself was incapable offoreseeing the potential demal1d from people to have mobile telephones in their cars or in their pockets, whichever, facilitating ubiquitous communication. However, as Bowler (1997) underscores, it is common for the direction ofthe development to be misjudged. People and firms are not particularly good at recognising potential which is why it is not surprising that most inventions never turn out to be ofany significance. Nevertheless, some phenomenon or products take off and become establish contrary to expectations, and the extraordinary developmel1t in mobile communications is a case in point. One could claim that mobile telephony is one of the most important innovations to hit Sweden since World War II. It has emerged as a substantial market of immense importance for the Swedish economy. Sweden ranks with Finland in having among the highest penetration rates ofmobile telephone subscribers in the world and where a few firms hold leading positions in different markets for mobile communications. For the Ericsson Group, for instance, mobile communication represents the largest business area. Ericsson holds a dominant position in the market for mobile systems, with a world market share ofover 40 per cent, and captured 14 per cent ofthe global market for mobile telephones during 1998. Mobile communication is likewise a growing business for Telia, nationally as well as internationally, and the operator has interests in 18 mobile telephone network operators around the world. The mobile communications operation has been quite profitable for n1any years. Mobile telephony also represents a profitable activity for the network Introduction 113

operators, Europolitan and Netcom with Comviq, and provides them with a stable cash flow and strong earnings. This is reflected in the strong development in their share prices on the Stockholm Stock Exchange. Numbers of other firms active in supplying different components to the mobile industry have also succeeded in capturing positions on this dynamic market. Among them are Noalto, which supplies details for mobile telephones to Ericsson; and Allgon, which supplies equipment for radio base stations and antennas for mobile telephones. Sales ofmobile telephones also represent a substantial business for the retail sector in consumer electronics. Moreover, a growing number ofinformation technology firms, such as Cetronic and Sendit, are developing and marketing a broad variety ofsoftware applications for mobile communications, e.g. integration ofmobile communication and the Internet. Given that mobile telephony has become of such importance for the Swedish economy, it is relevant to inquire into how this has been accomplished. What forces have been involved and who facilitated this development? 1.2 Forces behind the development This study analyses the role and characteristics ofentrepreneurship behind the development ofthe mobile telephone industry in Sweden since the 1950s. It is an acco"unt ofhow an area within the telecommunications industry undergoes a fundamental transition from being primarily the preserve of engineers, working with technical issues with a long-term perspective, to becoming a market characterised by fierce competition, a technology race, successive innovations, dynamic market effects and internationalisation. This process ofchange is commonly largely attributed to deregulation. To a limited extent its course has been directed by a strategy formed by politicians and policy makers. However, the explanation is not just that simple, as this study will show. The study interprets the process as resulting instead from entrepreneurship, both on the part of established participants as well as by new entrants having the capability of capitalising on an emerging market. I would like to underpin three factors which influence the development and the outline ofthis study: I) Mobile telephony - which is often seen as a recent phenomenon, launched sometime in the 1980s - has a considerably longer history, however, as this study will show. The development ofthe first mobile telephone system was initiated as early as 1950, which means that the advancement ofa Swedish mobile telephone industry extends over half a century. The introduction ofmobile radio goes back even further, as the Chicago police used mobile radios in the 1920S to improve their chances of 14 I Introduction

catching criminals like Al Capone, while the Swedish police force was equipped with mobile radio in tl1e early 1940s. 2) Mobile telecommunications could be regarded as a network technology or an infrastructural system like, for example, the railway networks, the fixed telephone network, and grid being thereby dependent UpOl1 several interrelated products. It is therefore relevant to approach mobile telephony as a system since it not only involves a single firm but consists ofa number offirms or organisations and technologies that are interconnected and interdependent. By regarding it as a network technology, it implies the existence ofnetwork externalities, influencing the price and cost structure for the industry (Shapiro and Varian 1999). A well-functioning technological system such as mobile telephony rests on strongly positive and reciprocal external economies, which tie together users, suppliers, and competitors (Carlsson and Jakobsson 1997, p 270). 3) Mobile telephony - which is not confined to artefacts, such as telephones, terminals, radio base stations, switches, system components, because the service or function that mobile telephony accommodates is equally essential. The feature that mobile communications provides could be labelled mobility, which is cl1aracterised by connectivity and the feasibility to communicate irrespective oflocation. Tl1is is the essence ofmobile telephony and something that captures a basic need among individuals and a fundamental social quality. To communicate while mobile was an option previously open to only a limited number ofprofessionals; today, it is available to anyone wanting to exercise it. In spite ofthe significance ofthe mobile service, focus has hitherto primarily been on the mobile telephones as such. This is largely because the distribution has been formed around the sales ofmobile telephones rather than round the marketing ofthe mobile service. It is therefore relevant to include distributors as well as users in order to embrace the scope ofthe mobile telephone industry. 1.3 The impact of entrepreneurship As entrepreneurship is a pivotal concept for this study I would like to clarify how it is used here. First there is the concept ofentrepreneurship which is the overall function for creating economic development (Schumpeter 1955). Then there is the entrepreneur, the economic agent who accomplishes entrepreneurs11ip. It is a temporal capacity because it is required that an entrepreneur carries out an entrepreneurial activity. This is further elaborated in the theoretical framework. Introduction 115

Entrepreneurship is predominately used in reference to small firms and to their founders and leaders, implying that entrepreneurship is an activity only performed by individuals. However, I propose, with the support ofthe literature survey that I present in the theoretical framework, that entrepreneurship could be defined as a function that could be carried out by a broader variety ofagents. This enables me to characterise entrepreneurship in three different ways, originating from three sources: I) the individual as entrepreneur, 2) the company as entrepreneur and 3) the network as entrepreneur. By using these three sources of entrepreneurship in an analytical framework I accomplish an analysis as to how the entrepreneurship could be attributed in the development ofmobile telephony in Sweden. Moreover, I am interested not only in who has carried out the entrepreneurship, but also in which entrepreneurial activities or innovations have been accomplished. Since I describe a development that extends over 50 years, it enables me to analyse how entrepreneurship has developed over time, to search for patterns in when the three sources ofentrepreneurship occur and in the types ofthe entrepreneurial activities performed at different stages in the development. 1.4 Network technology - technological system Mobile telephony, as I stated previously, is an example ofa network technology, which makes it relevant to characterise mobile telephony as a technological system. By applying Hughes' (1987) notion of technology systems I involve in the analysis not only the physical mobile telephone network, but also firms, organisations, as well as users. This facilitates an al1alysis of connections and interdependencies between the different participants and sub-systems. The close connections between different sub-systems mean that innovations are generated in several steps in a sort ofa chain reaction. Although complete new types of mobile telephones (portable, handportable, dual mode) are innovations as such they could also initiate subsequent sequences of innovations like for example: new performance ofnetwork operators' activity, new distribution channels and new usage patterns. 1.5 Course of events divided into three phases In order to unfold the emergence ofthe Swedish mobile telephone industry this study takes a long-term perspective and starts with the first steps in the forming of a mobile telephone industry in the early 195os, and covers its development up until the late 199os. Mobile telephony has undergone a 16 I Introduction

tremendous expansion during this time-span. Schematically it could be said to have developed from being a local business with local systems covering a limited geographical area into being a national and Nordic affair, with a national mobile network based on a Nordic standard, and then into becoming an international industry, with several international or global systems in operation. I therefore find it appropriate to divide the course ofevents into three phases: I) local, 2) national/nordic, and 3) international. This division reflects the extension ofthe various mobile telephone standards in operation over the years. It is not only relevant for tl1e underlying technology, however, it also reflects how the market has evolved and the activity ral1ge of the firn1s involved. Although the division basically follows the time path, the phases are partly overlapping and therefore not strictly sequential. The advantage in dividing the development into three phases is that it facilitates the presentation ofthe vast quantity ofempirical material and gives a structure to the account. Moreover, it makes it more manageable to carry out the analysis ofthe entrepreneurial activities. 1.6 Research question The modest projections and the low expectations that characterised the mobile telephone industry up until the late 1980s makes it appealing to examine how Sweden has accomplished the feat ofnow being in the forefront of this industry. This raises several interesting questions relating to the force behind this development, for instance, how did it come about that several Swedish companies succeeded in being frontrunners in this business and how is it that Sweden now has one oftl1e higl1est penetration rates in the world for mobile telephones. This study is basically driven by my fascination in discovering how this development has come about. What today is selfevident and something that every one believes will continue to grow in the years to come was originally an area few believed would ever be ofany great commercial interest. In spite ofthese unpromising prospects there were those working within this area, both individuals and firms, who laid the foundation for a significant industry which today represents a growing market for Swedish firms nationally as well as internationally. Besides the ambition to present a comprehensive account ofthe unfolding ofthe Swedish mobile telephone industry there is a theoretical purpose with this study. Given my interest in searching for the forces behind the developn1ent and in unravelling the relationship between individual and collective action, Introduction 117

entrepreneursh.ip is a pertinent theoretical construct that I will employ in an analytical practise. Entrepreneurship has generated a broad set oftheoretical propositions which is why I take it as point ofdeparture to formulate theoretically valid definitions ofentrepreneurship and to utilise these in an analysis ofthe development ofthe Swedish mobile telephone industry. In contrast to what dominates the entrepreneurship research area, which has a focus on studies ofspecific firms often with one time observations, tl1is study embraces an entire industry and its relevant participants which I label as a technological system. My point is to show that entrepreneurship is not an isolated phenomenon because it appears in a context and in this case within the boundaries of a specific technology. Besides searching for the occurrence ofthree sources ofentrepreneurship, I am also interested in exploring whether entrepreneurship functions as a coordinating mechanism in the development ofthe technological system. It concerns how the entrepreneurial activities taken together form the advancement ofthe technological system. Even though a number ofmarkets exist, some ofwhich I have listed below, they only embrace a part ofthe development because it is a process captured through external economy, competence flow and collaboration. It could be referred to as an industrial network. There is a network operators market where customers enroll as subscribers and where mobile telephones communicate. There is a market for mobile telephones and accessories to end-users. There is a market for wholesale trade in mobile telephones. There is a market for airtime where service providers can bundle the mobile telephone service. TI1ere is a market for mobile systems with switches and radio base stations. There is a market for consultants and system integrators and there is a market for firms working within mobile communications. Moreover, there is a market for standards on an international level. Even though this catalogue is not fully comprehensive it gives an idea of the broad scope of mobile telephony. Over time the definition ofthe market develops, influencing the activities ofthe participants in the technological system, and the overall development is a kind ofmarket process. 1 am interested in innovations which taken together move the technological system forward and I therefore classify them according to which type of innovation they are and discuss the magnitude and impact of innovations on the technological system. Given my interest to analysing the development it is relevant to discuss the relationship between the central two theoretical constructs in the study: entrepreneurship and technological system. Is the one creating the other 18 I Introduction